Top Themen Heute

Flagstone Reinsurance Holdings, S.A. (NYSE: FSR) today announced fourth
quarter 2011 basic book value per share of $11.21 and diluted book value
per share of $10.90, down (9.7)% and (9.6)%, respectively, for the
quarter (percentages inclusive of dividends). Net loss attributable to
Flagstone’s common shareholders for the quarter ended December 31, 2011,
was $85.2 million, or $(1.21) per share, compared to a net income of
$15.0 million, or $0.20 per share, for the quarter ended December 31,
2010. Net loss attributable to Flagstone’s common shareholders for the
year ended December 31, 2011, was $326.1 million, or $ (4.65) per
diluted share, compared to a net income of $97.1 million, or $1.23 per
share, for the year ended December 31, 2010. Net loss from continuing
operations for the year ended December 31, 2011, was $301.7 million, or
$(4.34) per share, compared to net income from continuing operations of
$83.8 million, or $1.17 per diluted share, for the year ended December
31, 2010.

As previously announced on October 24, 2011, the Company announced a
strategic business realignment to divest its ownership positions in its
Lloyd’s and Island Heritage reporting segments in order to address
changing business conditions, refocus its underwriting strategy on its
property catastrophe reinsurance business and reduce its focus on
operating segments that absorb capital and produce lower returns. Except
as explicitly described as held for sale or as discontinued operations,
and unless otherwise noted, all discussions and amounts presented herein
relate only to our continuing operations. All prior years presented have
been reclassified to conform to this new presentation.

The Company is a global reinsurance company. Our largest business is
providing property catastrophe reinsurance coverage to a broad range of
select insurance companies. These policies provide coverage for claims
arising from major natural catastrophes, such as hurricanes and
earthquakes, in excess of a specified loss. We also provide coverage for
claims arising from other natural and man-made catastrophes such as
winter storms, freezes, floods, fires and tornados. Our specialty lines
cover such risks as aviation, energy, accident and health, satellite,
marine, and workers’ compensation catastrophe.

Operating highlights for the periods ended December 31, 2011 and 2010
included the following:

For the three months ended December 31,

For the years ended December 31,

2011

2010

% Change

2011

2010

% Change

(Expressed in millions of U.S. dollars, except percentages)

Net operating (loss) income (1)

$

(69.0

)

$

(0.7

)

NM

(2)

$

(279.0

)

$

25.6

NM

(2)

Gross premiums written

$

80.7

$

83.2

(3.0

)

%

$

789.7

$

819.5

(3.6

)

%

Net premiums earned

$

121.8

$

155.5

(21.7

)

%

$

571.5

$

657.1

(13.0

)

%

Combined ratio

160.4

%

104.5

%

55.9

%

153.6

%

99.9

%

53.7

%

Total return on investments

0.4

%

0.8

%

(0.4

)

%

0.7

%

4.2

%

(3.5

)

%

(1)Net operating (loss) income, a non-GAAP financial measure,
is defined as net (loss) income from continuing operations adjusted for
net realized and unrealized gains (losses) - investments, net realized
and unrealized gains (losses) - other and net foreign exchange losses
(gains). A reconciliation of this measure to net (loss) income from
continuing operations is presented at the end of this release.

(2)NM - not meaningful.

The Company experienced positive rate movement at January 1 renewals
with North American rates up approximately 10-15%. The international
business was also positive with Europe up 5% and loss affected regions
up even more significantly. This was beneficial for the portfolio as the
Company continued to execute on its plan to reduce overall firm risk by
cutting international exposure limits by 50%, North American exposure
limits by 30% and overall gross premiums written by 30%. In addition to
the progress on rebalancing the portfolio, the Company is also making
significant progress on the divestiture of its Lloyd’s and Island
Heritage businesses with a short-list of qualified purchasers in
discussions for them. As previously announced, the Company expects that
these divestitures will lower our gross written premium by approximately
$300 million per annum, with minimal impact on expected return on
equity, as well as produce significant expense savings through reduced
infrastructure and the consequent requirement for operational support.

"For the fourth quarter, Flagstone produced a loss ratio of 119.2% and a
combined ratio of 160.4%,” said David Brown, Flagstone’s Chief Executive
Officer. "This resulted in a decrease in diluted book value of 9.6% for
the fourth quarter. The quarter was negatively impacted by upward
revisions from catastrophes occurring in the first half of 2011 and by
losses resulting from flooding in Thailand.”

Mr. Brown concluded, "2011 was the worst year on record for industry
losses resulting from international catastrophes, and as a global
reinsurer with a historical focus on international business, our results
reflected this unprecedented number of significant events. We have now
put 2011 behind us and expect that our realigned underwriting focus and
our steps to streamline our operating platform will allow us to return
to producing quality underwriting results. We continued to make progress
on our strategic business realignment during the fourth quarter, and we
look forward to providing updates as we make progress on the
divestitures. We also continue to work closely with our clients and
brokers and we are pleased with our book of business at the January 1
renewal period. We offer over $1 billion of underwriting capital, and
our rating agency capital adequacy measures continue to be in excess of
our normal operating buffer and expect them to increase further as a
result of our divestitures, making us a key and valued trading partner
for our clients.”

Results of Operations

As a result of the announced divestitures of Lloyd’s and Island
Heritage, the Company regularly reviews its financial results and
assesses performance on the basis of its single reportable segment. All
amounts in the following tables are expressed in thousands of U.S.
dollars, except percentages or unless otherwise stated.

Underwriting results

Below is a summary of the underwriting results and ratios for the three
months ended December 31, 2011 and 2010:

For the three months ended December 31,

2011

2010

$ Change

% Change

Property catastrophe reinsurance

$

13,474

$

20,430

$

(6,956

)

(34.0

)

%

Property reinsurance

38,564

31,667

6,897

21.8

%

Short tail specialty and casualty reinsurance

28,694

31,060

(2,366

)

(7.6

)

%

Gross premiums written

80,732

83,157

(2,425

)

(2.9

)

%

Premiums ceded

(37,529

)

(30,429

)

(7,100

)

23.3

%

Net premiums written

43,203

52,728

(9,525

)

(18.1

)

%

Net premiums earned

121,764

155,510

(33,746

)

(21.7

)

%

Other related income

42

365

(323

)

(88.5

)

%

Loss and loss adjustment expenses

(145,167

)

(105,052

)

(40,115

)

38.2

%

Acquisition costs

(20,022

)

(31,738

)

11,716

(36.9

)

%

General and administrative expenses

(30,213

)

(25,732

)

(4,481

)

17.4

%

Underwriting (loss)

$

(73,596

)

$

(6,647

)

$

(66,949

)

NM

(1)

Loss ratio

119.2

%

67.6

%

Acquisition cost ratio

16.4

%

20.4

%

General and administrative expense ratio

24.8

%

16.5

%

Combined ratio

160.4

%

104.5

%

The decrease in net underwriting results is primarily related to
incurred losses on more significant catastrophic events in 2011, as
compared to the same period in 2010.

Premiums ceded were 46.5% of gross reinsurance premiums written
compared to 36.6% for the same period in 2010.

The increase in the loss ratio compared to the fourth quarter of 2010
was primarily due to more significant losses from catastrophic events
compared to the same period last year, including net incurred losses
of $14.9 million on the Thailand floods and net adverse developments
on earlier 2011 known events of $48.4 million.

Each quarter we revisit our loss estimates for previous loss events.
During the quarter ended December 31, 2011, based on updated estimates
provided by clients and brokers, we have recorded net adverse
developments for prior accident years of $11.5 million.

The increase in general and administrative expenses compared to the
fourth quarter of 2010 was mainly attributable to goodwill impairment
charges of $3.2 million related to our South Africa and India
operations as well as a $1.1 million onerous lease charge.

Below is a summary of the underwriting results and ratios for the years
ended December 31, 2011 and 2010:

For the years ended December 31,

2011

2010

$ Change

% Change

Property catastrophe reinsurance

$

430,781

$

474,501

$

(43,720

)

(9.2

)

%

Property reinsurance

177,485

175,830

1,655

0.9

%

Short tail specialty and casualty reinsurance

181,431

169,203

12,228

7.2

%

Gross premiums written

789,697

819,534

(29,837

)

(3.6

)

%

Premiums ceded

(231,265

)

(150,805

)

(80,460

)

53.4

%

Net premiums written

558,432

668,729

(110,297

)

(16.5

)

%

Net premiums earned

571,478

657,103

(85,625

)

(13.0

)

%

Other related income

1,421

3,185

(1,764

)

(55.4

)

%

Loss and loss adjustment expenses

(676,535

)

(409,847

)

(266,688

)

65.1

%

Acquisition costs

(115,325

)

(112,014

)

(3,311

)

3.0

%

General and administrative expenses

(85,817

)

(134,496

)

48,679

(36.2

)

%

Underwriting (loss) income

$

(304,778

)

$

3,931

$

(308,709

)

NM

(1)

Loss ratio

118.4

%

62.4

%

Acquisition cost ratio

20.2

%

17.0

%

General and administrative expense ratio

15.0

%

20.5

%

Combined ratio

153.6

%

99.9

%

(1)NM - not meaningful.

The decrease in net underwriting results is primarily related to
incurred losses on more significant catastrophic events in 2011, as
noted in the loss ratio discussion below, as compared to 2010, as well
as an increase of $107.8 million in earned ceded premiums related to
the purchase of additional reinsurance protection in 2011 to reduce
our net exposure to catastrophic events and reinstatement premiums
incurred on our ceded reinsurance due to the loss activity in 2011.

Premiums ceded were 29.3% of gross reinsurance premiums written
compared to 18.4% for the same period in 2010.

The increase in loss ratio is primarily due to more significant losses
from catastrophic events in the current period, including net incurred
losses related to the Australian floods ($31.0 million), cyclone Yasi
($33.7 million), the Melbourne floods ($23.8 million), the New Zealand
earthquake of February 2011 ($144.0 million), the Japan earthquake and
tsunami ($108.5 million), the New Zealand earthquake of June 2011
($20.5 million), the U.S. tornadoes ($43.3 million), hurricane Irene
($11.8 million), the Danish cloudburst ($19.1 million) and the
Thailand floods ($14.9 million), as compared to the same period in
2010, which included losses related to the Chile earthquake ($64.0
million), the Deepwater Horizon oil rig ($27.5 million), the New
Zealand earthquake of September 2010 ($74.2 million), the Queensland
floods ($10.0 million) and a number of events impacting an Australia
aggregate cover ($25.0 million). Losses are net of retrocession but
excluding reinstatement premiums.

Each quarter we revisit our loss estimates for previous loss events.
During the year ended December 31, 2011, based on updated estimates
provided by clients and brokers, we recorded net adverse developments
for prior accident years of $23.6 million. During the year ended
December 31, 2010, the net favorable developments for prior accident
years were $10.9 million.

The decrease in general and administrative expenses is primarily the
result of our focus, implemented during 2010, on lowering and
rationalizing costs and expenses, including the disposal of corporate
aircraft. General and administrative expenses for 2010 included
charges of $12.9 million related to our decision to sell corporate
aircraft ($11.6 million of asset impairment charges and $1.3 million
loss on sale). In addition, as a result of the net loss incurred in
2011, staff compensation accrual and performance based compensation
expectations have been adjusted downward.

Discontinued Operations

(Loss) income from discontinued operations includes the financial
results of our former reporting segments, Lloyd’s and Island Heritage.
(Loss) income from discontinued operations for the three and twelve
months ended December 31, 2011 is $(17.6) million and $(21.7) million,
respectively, compared to $9.5 million and $4.6 million in the same
periods in 2010. The decreases from 2010 are primarily related to our
Lloyd’s operations in the form of underwriting losses resulting from
more significant catastrophic events during 2011 compared to 2010, as
well as impairment of deferred tax assets recorded in the fourth quarter
of 2011, partially offset by an underwriting profit at Island Heritage.

In addition, as of December 31, 2011, we had liabilities of discontinued
operations of $473.0 million. Although we account for the business
comprising our former Lloyd’s and Island Heritage segments as
discontinued operations, we will continue to own those businesses and be
subject to the risks associated with them until the divestitures are
complete.

Investment results

The total return on our investment portfolio, excluding noncontrolling
interests in the investment portfolio, comprises investment income and
realized and unrealized gains and losses on investments. For the three
and twelve months ended December 31, 2011, the total return on invested
assets was 0.4% and 0.7%, respectively, compared to 0.8% and 4.2%,
respectively for the three and twelve months ended December 31, 2010.

The change in the return on invested assets of (0.4)% during the three
months ended December 31, 2011, compared to the same periods in 2010 is
primarily due to lower return on equity and commodity markets and
negative performance on our investment funds which was partially offset
by better performance on our fixed maturities due to the impact of yield
curves.

The change in the return on invested assets of (3.5)% during the twelve
months ended December 31, 2011, compared to the same periods in 2010 is
primarily due to a higher impact of widening credit spreads, lower
portfolio duration during the year, and the negative performance on
investment funds.

Net investment income

Net investment income for the three months ended December 31, 2011 was
$6.6 million compared to $8.2 million for the same period in 2010, a
decrease of $1.6 million. The decrease is principally due to lower
invested assets in the current quarter.

Net investment income for the twelve months ended December 31, 2011, was
$34.3 million compared to $30.6 million for the same period in 2010, an
increase of $3.7 million. The increase is primarily due to the increase
in yield caused by the change in asset allocation, which was partially
offset by lower interest rates during the year.

Net realized and unrealized gains and losses – investments

Net realized and unrealized losses on the Company’s portfolio amounted
to $4.0 million and $20.8 million for the three and twelve months ended
December 31, 2011, respectively, compared to gains of $6.3 million and
$42.9 million for the three and twelve months ended December 31, 2010,
respectively. These amounts comprise net realized and unrealized gains
and losses on our fixed maturities, equities, other investments and
investment portfolio derivatives, which includes global equities, global
bonds, commodity futures, "to be announced" mortgage-backed securities
and total return swaps.

The decrease in the net realized and unrealized (losses) gains on
investments for the three months ended was primarily due to negative
performance of equity and commodity markets along with net realized and
unrealized losses on our investment funds which was partially offset by
better performance on our fixed maturities due to the impact of yield
curves.

The decrease in net realized and unrealized (losses) gains on
investments for the twelve months ended December 31, 2011, was primarily
due to a higher impact of widening credit spreads and lower portfolio
duration, negative performance on investment funds and negative
performance on equity and commodity markets during the year.

Treasury hedging and other

Net realized and unrealized gains and losses – other

The Company's policy is to hedge the majority of its currency exposure
with derivative instruments such as currency swaps and foreign currency
forward contracts. Net realized and unrealized gains - other amounted to
$7.5 million and $2.5 million for the three and twelve months ended
December 31, 2011, respectively, compared to $3.1 and $14.4 million,
respectively, for the same periods in 2010.

The components of the $7.5 million and $2.5 million gains for the three
and twelve months ended December 31, 2011, are as follows:

Three months ended

Twelve months ended

December 31, 2011

December 31, 2011

(Expressed in thousands of U.S. dollars)

Currency swaps

$

(582

)

$

(430

)

Foreign currency forward contracts

8,085

2,683

Reinsurance derivatives

-

241

Net realized and unrealized gains - other

$

7,503

$

2,494

Interest expense

Interest expense was $2.8 million and $11.7 million for the three and
twelve months ended December 31, 2011, respectively, compared to $2.6
million and $10.4 million for the three and twelve months ended December
31, 2010, respectively. Interest expense consists of interest due on
outstanding debt securities and the amortization of debt offering
expenses. The increase in interest expense for the three and twelve
months ended December 31, 2011, compared to the same period in 2010 was
due to higher LIBOR rates during the year.

Flagstone shareholders’ equity

During the fourth quarter of 2011, the Company made no repurchases
pursuant to its buyback program. As of December 31, 2011, authority to
make up to $11.2 million of repurchases remained available under the
buyback program.

At December 31, 2011, Flagstone’s shareholders' equity was $0.8 billion
and diluted book value per common share was $10.90.

Additional information

The Company will host a conference call on Wednesday, February 22, 2012,
at 9:30 a.m. (EST) to discuss this release. Live broadcast of the
conference call will be available on the Financial & Investor section of
the Company’s website at www.flagstonere.com.

The Company, through its operating subsidiaries, is a global reinsurance
and insurance company that employs a focused and technical approach to
the property, property catastrophe, and short-tail specialty and
casualty insurance and reinsurance businesses. The Company is traded on
the New York Stock Exchange under the symbol "FSR” and the Bermuda Stock
Exchange under the symbol "FSR BH”. Additional financial information and
other items of interest are available on the Company’s website located
at www.flagstonere.com.

Please refer to the unaudited December 31, 2011, Financial Supplement,
which will be posted on the Company’s website for more detailed
financial information.

Net (loss) income from discontinued operations per common
share—Diluted

$

(0.25

)

$

0.21

$

(0.31

)

$

0.06

Net (loss) income attributable to Flagstone per common
share—Diluted

$

(1.21

)

$

0.20

$

(4.65

)

$

1.23

Distributions declared per common share (1)

$

0.04

$

0.04

$

0.16

$

0.16

(1) Distributions declared per common share are in the
form of a non-dividend return of capital. Prior to the Company’s
redomestication to Luxembourg on May 17, 2010, such distributions
were in the form of dividends.

Cautionary Statement Regarding Forward-Looking Statements

This report may contain, and the Company may from time to time make,
written or oral "forward-looking statements” within the meaning of the
U.S. Federal securities laws, which are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. All
forward-looking statements rely on a number of assumptions concerning
future events and are subject to a number of uncertainties and other
factors, many of which are outside the Company’s control, that could
cause actual results to differ materially from such statements. In
particular, statements using words such as "may”, "should”, "estimate”,
"expect”, "anticipate”, "intend”, "believe”, "predict”, "potential”, or
words of similar import generally involve forward-looking statements.

Our results for the year ended December 31, 2011 reported in this press
release are not final and the audit with respect thereto has not been
completed. The reported results may change upon completion of the audit
by our independent accountants and such changes may be material. In
addition, important events and uncertainties that could cause the actual
results to differ include, but are not necessarily limited to: the
ongoing impact on our business of our net loss in 2011 and our inability
to return to profitability in a timely manner, if at all; the failure to
reach an agreement on and consummate the divestitures described above on
acceptable terms or at all, and the timing of any divestiture; the
amount of costs, fees, expenses and charges related to the divestitures
and realignment initiatives described above; the possibility that the
benefits anticipated from the divestitures and realignment initiatives
described above will not be fully realized in the timeframe anticipated,
if at all; the failure to successfully implement the Company’s business
strategy despite the completion of the divestitures and realignment
initiatives described above; the size and timing of any charges
associated with the initiatives described above; cancellation of our
reinsurance contracts by cedents; market conditions affecting our common
share price; the possibility that pricing changes in our industry may
make it difficult or impossible for us to effectively compete or produce
attractive returns; the possibility of severe or unanticipated losses
from natural or man-made catastrophes; the effectiveness of our loss
limitation methods; our dependence on principal employees; the cyclical
nature of the insurance and reinsurance business; the levels of new and
renewal business achieved and the premium environment; opportunities to
increase writings in our core property and specialty reinsurance and
insurance lines of business and in specific areas of the casualty
reinsurance market; the sensitivity of our business to financial
strength ratings established by independent rating agencies; the impact
of the agencies’ ongoing review of our financial strength ratings and
the consequences to our business of this review and sustained negative
outlook or any downgrade; our ability to raise capital on favorable
terms or at all; the estimates reported by cedents and brokers on
pro-rata contracts and certain excess of loss contracts in which the
deposit premium is not specified; the inherent uncertainties of
establishing reserves for loss and loss adjustment expenses, and our
reliance on industry loss estimates and those generated by modeling
techniques; unanticipated adjustments to premium estimates; changes in
the availability, cost or quality of reinsurance or retrocessional
coverage; our exposure to many different counterparties in the financial
service industry, and the related credit risk of counterparty default;
changes in general economic conditions; changes in governmental
regulation or tax laws in the jurisdictions where we conduct business;
our need for financial flexibility to maintain our current level of
business; the amount and timing of reinsurance recoverables and
reimbursements we actually receive from our reinsurers; the overall
level of competition, and the related demand and supply and premium
dynamics in our markets relating to growing capital levels in the
insurance and reinsurance industries; the investment environment;
declining demand due to increased retentions by cedents and other
factors; our ability to continue to implement our expense reduction
initiatives to the extent and in the timeframe anticipated; the impact
of Eurozone instability and terrorist activities on the economy; and
rating agency policies and practices, particularly related to the
duration a company may remain on negative outlook without further
ratings action.

On December 19, 2011, Moody’s Investor Services confirmed the ratings
and removed the ratings from under review. On March 31, 2011, Fitch
Ratings re-affirmed the A- insurer financial strength of Flagstone
Suisse and revised its outlook to negative. On April 12, 2011, A.M. Best
Co. re-affirmed the A- financial strength rating of Flagstone Suisse and
revised its outlook to negative. On October 24, 2011, A.M. Best Co.
commented that the Company’s financial strength rating of A- (Excellent)
is unchanged following the restructuring announcement and also noted
that the outlook for the Company’s financial strength rating remains
negative. Currently, the majority of Flagstone Suisse reinsurance
contracts permit cancellation if our financial strength rating is
downgraded below A- by A.M. Best Co. Resolution of the negative outlook
is dependent on our ability to generate a reasonable and sustainable
level of profitability, reduce our dependence on retrocessional support,
bring our risk appetite in line with our available capital, continuation
of our expense reduction initiatives and, most importantly, improving
our overall financial flexibility. We are working to successfully
address each of these items. A downgrade or sustained negative outlook
by any rating organization could result in a significant reduction in
the number of reinsurance contracts we write and in a substantial loss
of business as our customers, and brokers that place such business, move
to other competitors with higher financial strength ratings, as well as
resulting in negative consequences for our results of operations, cash
flows, competitive position and business prospects. Although we
regularly provide financial and other information to rating agencies to
both maintain and enhance existing financial strength ratings, we cannot
assure that our financial strength ratings will not remain on negative
outlook or be downgraded in the future by any of these agencies.

We seek to maintain a prudent amount of capital for our business and
maintain our overall financial flexibility. When assessing our financial
position and potential capital needs, we consider, among other things,
the low investment returns environment, our recent and potential net
exposure to losses associated with catastrophic events, the amount of
and changes in our reserves, underwriting opportunities and market
conditions. We may decide to raise additional capital in the future to
continue and/or invest in our existing businesses or write new business,
although any such decision will be dependent on then-existing market and
other conditions.

These and other events that could cause actual results to differ are
discussed in more detail from time to time in our filings with the SEC.
We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by U.S. Federal
securities laws. Readers are cautioned not to place undue reliance on
these forward-looking statements, which are subject to significant
uncertainties and speak only as of the date on which they are made.

Non-GAAP Financial Measures

In addition to the U.S. GAAP financial measures set forth in this Press
Release, we have presented "basic book value per common share”, "diluted
book value per common share” and "operating income”, which are non-GAAP
financial measures. Management uses growth in diluted book value per
common share as a prime measure of the value the Company is generating
for its common shareholders, as management believes that growth in the
Company’s diluted book value per common share ultimately translates into
growth in the Company’s stock price.

Basic book value per common share is defined as total Flagstone
shareholders’ equity divided by the number of common shares outstanding
at the end of the period plus vested restricted share units, giving no
effect to dilutive securities. Diluted book value per common share is
defined as total Flagstone shareholders’ equity divided by the number of
common shares and common share equivalents outstanding at the end of the
period including all potentially dilutive securities such as the
warrant, performance share units ("PSUs”) and restricted share units
("RSUs”). When the effect of securities would be anti-dilutive, these
securities are excluded from the calculation of diluted book value per
common share. A warrant was anti-dilutive and was excluded from the
calculation of diluted book value per common share as at December 31,
2011 and December 31, 2010.

While we believe that these non-GAAP financial measures provide useful
supplemental information to investors, there are limitations associated
with the use of these non-GAAP financial measures. Basic book value per
common share does not reflect the number of common shares that may be
issued upon vesting or exercise of dilutive securities. On the other
hand, by giving effect to dilutive securities, diluted book value per
common share takes into account common share equivalents and not just
the number of common shares actually outstanding. These non-GAAP
financial measures are not prepared in accordance with GAAP, are not
based on any comprehensive set of accounting rules or principles, are
not reported by all of our competitors and may not be directly
comparable to similarly titled measures of our competitors due to
potential differences in the exact method of calculation. In light of
these limitations, we use these non-GAAP financial measures only as
supplements to GAAP financial measures and provide a reconciliation of
the non-GAAP financial measures to their most comparable GAAP financial
measures.

Book Value Per Common Share (unaudited)

As at December 31, 2011 and 2010

(Expressed in thousands of U.S. dollars, except share and per
share data)

As at December 31,

2011

2010

Flagstone shareholders' equity

$

789,048

$

1,134,733

Potential net proceeds from assumed:

Exercise of PSU (1)

-

-

Exercise of RSU (1)

-

-

Conversion of warrant (2)

-

-

Diluted Flagstone shareholders' equity

$

789,048

$

1,134,733

Cumulative distributions paid per outstanding common share (3)

$

0.72

$

0.56

Common shares outstanding - end of period

70,167,142

68,585,588

Vested RSUs

233,709

262,013

Total common shares outstanding - end of period

70,400,851

68,847,601

Potential shares to be issued:

PSUs expected to vest

1,676,125

3,998,558

RSUs outstanding

290,470

315,200

Conversion of warrant (2)

-

-

Common shares outstanding - diluted

72,367,446

73,161,359

Basic book value per common share

$

11.21

$

16.48

Diluted book value per common share

$

10.90

$

15.51

Basic book value per common share plus accumulated distributions

$

11.93

$

17.04

Diluted book value per common share plus accumulated distributions

$

11.62

$

16.07

Distributions per common share paid during the period (3)

$

0.16

$

0.16

(1)No proceeds due when exercised

(2)Below strike price

(3)Distributions paid per common share are in the form of
a non-dividend return of capital. Prior to the Redomestication, such
distributions were in the form of dividends.